Apple’s decline turned America into banana republic

The Chiquita/Fyffes deal and the nation’s favorite fruit

Bananas have become so popular in America that even a major merger and a minor plague might not impact their prices too much.

Move over Dole. On Monday, Chiquita
US:CQB
and Irish fruit company Fyffes
IE:FQ3
agreed to merge, creating the world’s largest banana company, ChiquitaFyffes. In a $1.07 billion all-stock deal, the combined company would have an estimated $4.6 billion in annual revenue from sales of more than 160 million boxes of bananas.

The merger should help the companies more efficiently supply the planet’s biggest banana republic: namely, the U.S. “The No. 1 fruit Americans eat is bananas,” says Harry Balzer, chief industry analyst with NPD Group. Indeed, while in 1970, Americans ate just about seven pounds of bananas per person (and more than 10 pounds of apples, which were at that time our favorite fruit), by 2010, they were eating more than 10 pounds of bananas per person, and only around 9.5 pounds of apples, according to U.S. Department of Agriculture data. Global consumers love bananas too. According to the United Nations, global banana exports in 2012 climbed more than 7% from 2011 to a record high of 16.5 million tons; the U.S. and Europe accounted for more than half of banana imports.

The Chiquita-Fyffes merger will generate an annual cost savings of $40 million by 2016, according to the companies. And that savings might mean slightly lower prices for consumers, says IBISWorld analyst Antal Neville, who says that ChiquitaFyffes may want to gain market share by offering up the best banana prices for consumers. Currently, bananas cost roughly $0.60 per pound — significantly less on a per-pound basis than apples, oranges, grapefruits, tomatoes and more, according to government data. “Because it’s one of the most consumed fruits, prices really matter,” says Neville. “So the merger could mean cost savings for consumers.”

Indeed, grocers are often reluctant to pass along price increases. According to a United Nations report, wholesale banana prices increased 6.5% in 2012 compared with 2011, while retail prices actually decreased 1.3%. “This apparent contradiction could be explained by the fact that supermarkets spread temporary losses from higher wholesale prices across other products that they sell,” while keeping the prices of bananas low for their customers, the report concludes.

Still, if the deadly banana plague that has hit Asia and parts of Australia hits Latin America and the Caribbean, which produce roughly three-fourths of the world’s bananas, prices could jump, says Neville. The disease, which scientists say is caused by a soil fungus, attacks the popular Cavendish variety of bananas (which makes up about 80% of all banana exports) and rots the banana plants, turning the normally yellowish banana a rancid-smelling brownish color, and rendering the fruit inedible. The disease is especially troubling because it ruins large numbers of bananas (a variant of today’s fungus virtually killed off the Gros Michel banana variety) and recently made the jump from Asia to Mozambique and Jordan.

Experts say that if the banana plague takes a particularly heavy toll, consumers may feel the impact on their wallets — and not just from the price of buying a banana at the grocery store. Neville says that if prices climb high enough, some businesses will choose to raise prices on things like smoothies and muffins that contain bananas. Still, he adds, a much more likely scenario is that — unless prices skyrocket — companies will eat a potential uptick in banana prices. Indeed, businesses know how much we love bananas, and they don’t want to risk alienating consumers by hiking the price unless they have to.

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